Are we still the Motor City? Despite undeniable challenges, the answer is still 'yes'.

The declining market share and financial health of the automotive manufacturers and their OEM suppliers has been the focus of a lot of local and national press of late. We are kept up to date on GM's burdensome health-care and retirement costs and Toyota's unrelenting climb in market share. We are not kept so up to date, however, on how all this is affecting the Detroit Region's economy and our legacy as the Automotive Capital of the World.

Michigan's current share of U.S. car and truck production is a little over 22 percent. Ten years ago, Michigan's share of production was nearly 26 percent. While not a positive trend, these figures may still surprise many people. With so much press concentrated on the "transplants" building new assembly plants in the Southeast, it may come as a surprise that Michigan still produces more cars than any other state, and in fact, the Detroit Region by itself still produces more cars than any other state in the nation.

Manufacturing employment has declined 17 percent over the last 10 years in the United States and 24 percent in the Detroit Region. But it's interesting to note that while there are 42,000 fewer manufacturing jobs today than 10 years ago, a greater percentage of the remaining jobs are in the auto industry. Ten years ago, 47 percent of our region's manufacturing jobs were in transportation equipment (aka the auto industry) but today that number has actually grown to 50 percent.

In 1997, the manufacturing of cars and car parts made up 10 percent of Michigan's Gross State Product and in 2003 that number remained unchanged. And when adjusted for inflation, the portion of the state's GSP that is represented by auto manufacturing has grown by 8 percent since 1997.

One doesn't have to be an economist to understand why so many new assembly plants are being constructed in the Southeast. Non-unionized manufacturing plants compensate their employees an average of $9.58 an hour less than in unionized states. As unions continue to make concessions and non-unionized plants struggle to attract a skilled workforce, some interesting things are happening though. In the last five quarters alone, compensation rates (wages and benefits) in unionized manufacturing plants have only increased 0.5 percent, while non-unionized plants have increased their employees' compensation by 6 percent. In just 5 quarters, the difference between the compensation rates of union and non-union plants has decreased by $1.27 per hour.

There's more to the auto industry than production however--and this is what separates the Detroit Region from the rest of the country. Times have changed and the automobile is now the most technologically advanced consumer product. It takes a lot of brainpower these days to conceive, design and execute the modern automobile, and that brainpower is increasingly located in the Detroit Region.

The American auto companies increasingly do business with foreign OEM suppliers, most of which have found it necessary to locate a technical facility of some sort in the region. Couple this with the auto companies' growing trend to pass more research-and-development responsibilities down to their suppliers, and you have the makings for an automotive technology hub rivaled only by Frankfurt, Germany. The Detroit Regional Chamber maintains a database of these technology centers, and to date there are 188 locations in the database with more still to be identified. This is why Michigan is the No. 1 state for vehicle-related R & D and also No. 1 in industrial R & D intensity (the ratio of R & D dollars to Gross State Product).

In so many ways, the battlefront to maintain market share is right here in the Detroit Region. Yes, this creates many challenges for our economy but so many opportunities as well.

Melissa Armstrong is senior director of Research & Information at the Detroit Regional Chamber and Detroit Regional Economic Partnership.

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Top States for Car & Truck Production, 2004

                                 TOTAL MOTOR
STATE      CARS       TRUCKS     VEHICLES

Michigan   1,259,177  1,339,244  2,598,421
Ohio         797,009    943,622  1,740,631
Missouri           -  1,226,300  1,226,300
Kentucky     504,329    658,352  1,162,681
Indiana      105,550    664,194    769,744
Tennessee    417,781    280,736    698,517

SOURCE: Automotive News

Gross State Product for Motor Vehicle & Parts Manufacturing (1997
dollars)

YEAR    GSP

1997    $29,519,000
1998    $29,624,000
1999    $32,565,000
2000    $33,474,000
2001    $28,967,000
2002    $30,487,000
2003    $31,771,000

SOURCE: U.S. Bureau of Economic Analysis